2024 (10) TMI 476 - AT - Income Tax

Levy of penalty u/sec 271(1)(c) - disallowance u/sec 80(IB)(10) - HELD THAT - We find that the claim of the assessee is in consideration of the financial statements and the assessee adopted one of the possible views and has made similar claims in the earlier years and penalty was not levied. We are of the view that penalty cannot be automatic and every addition/disallowance in the assessment proceedings cannot be gate way for levy of penalty and relay on the decision of Manjunatha Cotton and Ginning factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT Further the assessee has made a claim under the bonafide belief that it is allowable under the law. Also see Reliance Petroleum Products Ltd. 2010 (3) TMI 80 - SUPREME COURT wherein held making in incorrect claim in law cannot be tantamount to furnishing in accurate particulars. Thus penalty cannot be sustained. Decided in favour of assessee.

Issues:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act.
2. Time limitation for passing penalty order.
3. Consideration of responses by the Assessing Officer.
4. Claim of deduction under Section 80IB(10) of the Act.
5. Disallowance of deduction and subsequent penalty proceedings.
6. Appeal before the CIT(A) and the Appellate Tribunal.
7. Interpretation of "concealment of income" and "furnishing inaccurate particulars" under section 271(1)(c).

Issue 1: Levy of penalty under section 271(1)(c) of the Income Tax Act:
The appellant contested the penalty imposed under section 271(1)(c) by the Assessing Officer, arguing that the order was unjustified as the income assessed was the same as declared. The appellant claimed that the penalty order was time-barred and void as it was passed after three years. The appellant also highlighted that the CIT(A) did not consider the appellant's submissions before confirming the penalty.

Issue 2: Time limitation for passing penalty order:
The appellant argued that the penalty order was time-barred as it was passed after the expiry of the prescribed period of six months from the date of the CIT(A) order. The appellant contended that the penalty order passed after three years was void and not tenable.

Issue 3: Consideration of responses by the Assessing Officer:
The appellant raised concerns regarding the Assessing Officer not considering the responses provided by the appellant before levying the penalty. The appellant emphasized that the responses were submitted in compliance with the notices issued but were not taken into account.

Issue 4: Claim of deduction under Section 80IB(10) of the Act:
The case involved the disallowance of the claim of deduction under Section 80IB(10) of the Act due to the violation of prescribed conditions. The Assessing Officer denied the deduction for the entire project, leading to the assessment of a higher total income. The appellant contested this disallowance, leading to penalty proceedings under section 271(1)(c).

Issue 5: Disallowance of deduction and subsequent penalty proceedings:
Following the disallowance of the deduction under Section 80IB(10) of the Act, penalty proceedings were initiated by the Assessing Officer. The appellant's explanations were deemed unsatisfactory, resulting in the imposition of a penalty. The CIT(A) partly allowed the appeal but upheld the penalty, leading to the appeal before the Appellate Tribunal.

Issue 6: Appeal before the CIT(A) and the Appellate Tribunal:
The appellant challenged the CIT(A)'s decision to confirm the penalty imposed by the Assessing Officer. The appellant argued that similar claims were made in earlier years, where penalties were not levied. The Appellate Tribunal considered the appellant's submissions, previous decisions, and the consistency in claiming deductions, ultimately setting aside the penalty and allowing the appeal in favor of the assessee.

Issue 7: Interpretation of "concealment of income" and "furnishing inaccurate particulars" under section 271(1)(c):
The Appellate Tribunal referred to judicial decisions to interpret the provisions of section 271(1)(c) regarding concealment of income and furnishing inaccurate particulars. The Tribunal emphasized that every addition/disallowance in assessment proceedings cannot automatically lead to the levy of a penalty. Relying on legal precedents, the Tribunal concluded that the penalty cannot be sustained in this case, as the appellant made claims under a bonafide belief and did not furnish inaccurate particulars. The Tribunal directed the Assessing Officer to delete the penalty, allowing the appeal in favor of the assessee.

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